On August 13, 2013, the Commodity Futures Trading Commission issued its final rules ("Final Rules") applicable to registered investment companies whose advisers are now required to dually register as commodity pool operators ("Dually Registered CPOs") as a result of changes made to CFTC Regulation 4.5 finalized in February 2012 (as described in a Katten Client Advisory of February 22, 2012). The CFTC earlier had proposed to amend Part 4 of its regulations ("Part 4 Regulations") to harmonize compliance obligations of such commodity pool operators (CPOs) ("Proposed Rules") that were already subject to compliance requirements imposed by the Securities and Exchange Commission. Responding to comments received on the Proposed Rules, the CFTC altered its original approach to harmonize CFTC and SEC regulatory requirements applicable to Dually Registered CPOs and instead adopted a "substituted compliance" regime approach in the Final Rules.
The Final Rules permit compliance with the SEC requirements relating to disclosure, reporting and recordkeeping applicable to registered investment companies and their advisers ("SEC Regulatory Regime") in lieu of compliance with substantially all of the CFTC’s relevant Part 4 Regulations. This approach stems from the CFTC’s determination that compliance with the regulatory objectives in its Part 4 Regulations largely can be accomplished by compliance with the SEC Regulatory Regime. In addition, the provisions of the Final Rules respond to many concerns raised in comments to the Proposed Rules that Dually Registered CPOs, if required to comply with existing Part 4 Regulations in addition to their obligations under the SEC Regulatory Regime, "may be subject to duplicative, inconsistent and possibly conflicting, disclosure and reporting requirements."
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